We Record a Contingent Liability When the Likelihood of the Loss

question 88

True/False

We record a contingent liability when the likelihood of the loss occurring is reasonably possible and the amount is reasonably estimable.We record a contingent liability when the likelihood of the loss occurring is probable and the amount is reasonably estimable.

---

Definitions:

Dishonors

Refers to the failure to fulfill an obligation, especially the failure of a bank to pay a check or note when presented.

Sufficient Funds

The necessary amount of money available to complete a transaction or meet financial obligations.

Liable

Being legally responsible or obligated to make amends for harm caused to another person or property.

Drawee

The party upon whom a check, draft, or other negotiable instrument is drawn and is expected to pay.